Flambeau Corporation has paid 60 consecutive quarterly

cash dividends (15

Flambeau Corporation has paid 60 consecutive quarterly cash dividends (15

Flambeau Corporation has paid 60 consecutive quarterly cash dividends (15 years' worth). The
last six months have been a real cash drain on the company, however, as profit margins have
been greatly narrowed by increasing c
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paid-60-consecutive-quarterly-cash-dividends-15
Flambeau Corporation has paid 60 consecutive quarterly cash dividends (15

Flambeau Corporation has paid 60 consecutive quarterly cash dividends (15 years' worth). The
last six months have been a real cash drain on the company, however, as profit margins have
been greatly narrowed by increasing competition.

With a cash balance that is only enough to meet day-to-day operating needs, the president,
Vince Ramsey, has decided that a stock dividend instead of a cash dividend should be
declared. He tells Flambeau's financial vice-president, Janice Rahn, to issue a press release
stating that the company is extending its consecutive dividend record with the declaration of a
5% stock dividend. "Write the press release convincing the shareholders that the stock dividend
is just as good as a cash dividend," he orders. "Just watch our share price rise when we
announce the stock dividend; it must be a good thing if that happens."

Instructions

(a) Who are the stakeholders in this situation?

(b) What is the effect of a stock dividend on a corporation's shareholders' equity accounts?

(c) Will the share price rise if a stock dividend is declared, as the president expects?

(d) Is there anything unethical about President Ramsey's intentions or actions?

Flambeau Corporation has paid 60 consecutive quarterly cash dividends (15

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paid-60-consecutive-quarterly-cash-dividends-15

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